Financial Accounting and Reporting: Empirical Evidence on Small and Medium-Sized Enterprises in Malaysia

Abstract

The research investigates the financial accounting and reporting of small and medium-sized enterprises (SMEs) in Malaysia. The aims are to discover features of SMEs' financial reporting and to assess its costs and benefits to the stakeholders. This study adopts a positivist paradigm. The research design was drawn from a survey of 150 owner-managers of SMEs in the Northern Corridor Economic Region of Malaysia. The data is analysed using both univariate and multivariate analyses. Results reveal that financial information in the SMEs' financial statement is incapable to satisfy the main users' requirements. Results indicate that the main weaknesses of SMEs' financial statements are in terms of financial statements' preparation with outdated information, tax motivation and limited disclosures. This study makes several important contributions to the existing studies of SMEs' reporting, particularly in the literature related to information requirements of financial statement's users and the financial reporting's costs and benefits. The results of this research are of particular concern to SMEs, their accountants and stakeholders in Malaysia and other jurisdictions. Research findings should assist policymakers in formulating an appropriate policy on SMEs' financial reporting.